Dan Tehan (Wannon, Liberal Party) Share this | Hansard source

I rise today to talk on the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011. The coalition will not oppose this bill but we will seek to make an important amendment to it. We will do that to make sure that we get the balance right in this bill. While we are broadly supportive of the objective to achieve better alignment between shareholders and boards on the issue of executive remuneration, we are concerned about the potential for unintended consequences which can flow from excessive and overly prescriptive regulation in this area—and, sadly, the Labor government have a strong history of excessive and overly prescriptive regulation. They continue to want to throttle the life out of business in Australia, and that is why we have to make sure that we get the balance right in this bill.

This bill implements recommendations of the Productivity Commission in its recent inquiry into executive remuneration in Australia, which reported on 4 January 2010. Concern around the issue of executive remuneration led to the review by the Productivity Commission. The review commenced in 2009 and received 170 submissions, showing that this is an issue which the community and the business community take incredibly seriously. The final report was provided to the Australian government on 19 December 2009.

An exposure draft elicited further comment and changes to the proposed legislation. The bill's main provisions include requiring a vote for directors to stand for re-election if they do not adequately address shareholder concerns on remuneration issues over two consecutive years, the so-called two-strikes rule; changing regulation with respect to the use of remuneration consultants; prohibiting directors and executives from voting their shares on remuneration resolutions; prohibiting the hedging of incentive remuneration; requiring shareholder approval for declarations of 'no vacancy' at an annual general meeting; requiring that any directed proxies are voted and voted as directed; and reducing the complexity of the remuneration report by confining disclosures in the report to the key management personnel.

Change to voting arrangements must be careful not to distort the wishes of the majority of shareholders. The views of a minority should not too easily hold the majority hostage. When it comes to the level of support required to reject a remuneration report, a process that can lead to a spill of the board, we believe the bar has been set too low. We believe that an active minority could disrupt company proceedings if this bill is passed as it is.

We will be moving an amendment in relation to the threshold for rejecting the remuneration report. As currently proposed, the threshold for the two-strikes rule is 25 per cent of votes cast. The coalition will be moving an amendment to require the threshold to be 25 per cent of the total votes available to be cast, and this is an important amendment. Twenty-five per cent of the votes cast means that you could have seven per cent of company shareholders voting to remove a board. This is dangerous because, if you had an active minority wanting to disrupt the ongoing proceedings of a company, with this threshold they could do just that. We want to introduce an amendment which provides a sensible safeguard. Moving to a threshold of 25 per cent of the total votes available to be cast seems to me a very sensible proposition and one which the House and the parliament should be able to agree on. As I have said, this will prevent a small number of shareholders dictating a result which is not shared by a majority of the passive non-voting shareholders. We will not oppose this bill but we want to make a sensible amendment which provides balance to it. I urge the House and the parliament to support our amendment.

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